Old Republic International Corp. (

ORI

)

Q1 2011 Earnings Call

April 28, 2011 3:00 PM ET

Executives

Leslie Loyet – Financial Relations Board

Al Zucaro – Chairman and CEO

Chris Nard –President

Analysts

Bill Clark – KBW

Beth Malone – Wunderlich

Stephen Mead – Anchor Capital Advisors

Presentation

Operator

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Previous Statements by ORI
» Old Republic International CEO Discusses Q4 2010 Results - Earnings Call Transcript
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» Old Republic International Corp. Q2 2010 Earnings Call Transcript

Please standby we are about to begin. Good day, ladies and gentlemen. And welcome to today’s Old Republic International First Quarter 2011 Call. As a reminder, today’s call is being recorded.

And at this time, I would like to turn the call over to Ms. Leslie Loyet with Financial Relations Board. Please go ahead ma’am.

Leslie Loyet

Thank you. Good afternoon. And thank you all for joining us today for Old Republic conference call to discuss first quarter 2011 results. This morning we distributed a copy of the press release and hopefully you’ve all had a chance to review it. If there is anyone online who did not receive a copy, you may access it at Old Republic’s website at

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www.oldrepublic.com

.

Please be advised this call may involve forward-looking statements as discussed in the press release dated April 28, 2011. Risks associated with these statements can be found in the company’s latest SEC filings.

Joining us today from management are Al Zucaro, Chairman and Chief Executive Officer; and Chris Nard, President.

At this time, I’d like to turn the call over to Al for his opening remarks. Please go ahead.

Al Zucaro

Okay. Thank you. So once again we appreciate your interest in joining us with this latest quarterly review of our business. As always we assume that you’ve had a chance to review the news release this morning. So we don’t need to repeat what’s in it.

Chris and I will make therefore limit ourselves to some comments as we usually do to add a little more color to the release and then, we’ll open it up to the conservation -- to the questions that you may have.

Once again there is as there has been for several quite a number of quarters now, there has been very little new to report for our business. The biggest news was last quarter, fourth quarter of last year when we announced that we had closed our on the PMA merger.

But, as you can readily see in the release our consolidated results for the first three months of this year, we’re again, unfortunately posted in red ink. But the damage so to speak was about half as much as we sustained in the final quarter of last year.

The summary table on page two of the release shows that our earnings difficulties are still very much concentrated in our Mortgage Guaranty line and in the smaller but related consumer credit indemnity coverage that we and have underwritten for many years in our General Insurance segment. While the remainder of our General and Title Insurance businesses are profitable both still remain well below their long-term potential.

So let’s see, if we focus first on General Insurance, the underwriting ratio there was about the same quarter-over-quarter. The CCI line as we pointed out in the release is continuing to make the biggest difference from an underwriting standpoint. Its impact was a little worse in this year’s first quarter when you compare that to last year’s first three months.

As -- but as we’ve -- as we reported for the past three quarters or so, claim payments in CCI, the activity in claim payments has been affected by a quicker resolution of certain defaulted loans. In the last six months or so the, however, the reported CCI delinquencies and the number of claims are waiting validation have truly been trending down fairly consistently. So as we speak this is also continuing and claim payment trends had fallen fairly steadily throughout the last six months or so.

Nonetheless, we are – we’ve been kind of reluctant to take down reserve levels in CCI. So we’re still looking for greater certainty if you will that the insured institutions are in fact now staying on top of timely and proper loan default submissions before we take any action to reduce reserves in that business.

If leave aside the CCI product, which is again currently inactive and so far as new production is concerned. The remainder of our General Insurance business is performing reasonably well. The statistics that you see in the exhibit that we posted on our website this morning show that the three largest coverage’s of workers compensation and commercial automobile which is truck insurance and general liability continue to product very acceptable claim ratios.

The last three years as matter of fact X the CCI impact, these ratios have averaged about 67.9% almost 68%. So that the 68.9% that we show in the first quarter in the exhibit is very much inline with that.

So if you add another say 24, 25 points of expenses to that ratio, you can readily see that the book of business in General Insurance is generating about 5 points of underwriting margin and we think that that’s a very good result.

The main issue therefore with our General Insurance business continues to revolve around a fairly lethargic topline. Market conditions as we see them are not sufficiently positive for us to be more aggressive on the production front.

We, in fact, continued to believe that the American economy remains relatively weak and that sales and employment levels in particular need to get quite a bit stronger and provide a greater -- and thus provide a greater uplift to premium production.

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